The Canadian dollar
Speculation that Iceland may adopt the Canadian dollar gained steam after Canada’s ambassador to the island nation has given his approval to the idea.
The Icelandic economy is showing signs of improvement, with its debt having recently been upgraded by credit rating agency Fitch. But the krona, which grew nearly 90-percent between 2001 and 2007, never fully recovered crashing 92-percent back in 2008.
Officially, Iceland is seeking to ditch its krona for the euro, which is seen as a more stable currency. But with the economic troubles plaguing euro-based economies at the moment, the movement has been stalled.
Pegging the krona to currencies other than the euro, like the Norwegian krona, American dollar and even the Japanese yen, have been considered. Last year, a group of Icelandic businessmen contacted the Canadian government with the idea of adopting the country’s currency, the loonie.
Alan Bones
Canadian ambassador to Iceland, Alan Bones, was slated to make a speech last Saturday at a conference on the future of the Icelandic krona, saying the if Iceland wanted to adopt the loonie, Canada would be ready to talk.
But the speech, which would have been Canada’s first public response to the speculation, was cancelled at the last moment by Canada’s Foreign Affairs and International Trade Department because news of it spread across Iceland and Canada.
“Once we got wind of [the speech] and it went through the approval channels, we decided it was not an appropriate venue,” Joseph Lavoie, Foreign Minister John Baird’s press secretary, told the Canadian Globe and Mail. “It’s a political event. So that the decision was made that it’s not an appropriate event for him to speak at . . . While he may have thought about delivering those remarks, those remarks won’t be delivered.”
A press statement later released read, “Canada does not comment publicly on other countries’ currencies. This is an issue for the Icelandic government and people.”
Douglas Porter
Bank of Montreal economist Douglas Porter told the Canadian Press that Iceland could adopt the loonie, but it would first have to buy a lot of the currency, which would put pressure on the Canadian economy.
That impact would be negligible, Porter said, because of the tiny size of the Icelandic economy compared to Canada’s.
“Frankly, I think we should take it as a great compliment. I know everybody thinks of Iceland as a basket case, but they are beginning to turn things around,” Porter said.
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